Zopa. Neither a borrower nor a lender be!

CHornsey

Hi everyone.

I know when zopa first started Martin said it wasn't worth investing. I wondered what the current stance was given the low interest rates on savings but also the uncertain economic climate and possibility of higher defaults.

Thanks

drjones

CHornsey wrote: »

Hi everyone.

I know when zopa first started Martin said it wasn't worth investing. I wondered what the current stance was given the low interest rates on savings but also the uncertain economic climate and possibility of higher defaults.

Thanks

Everything has changed since the original post. Zopa currently gives better returns than any savings account, although the reward/risk ratio has diminished somewhat over the past year or so (as savings interests have risen slightly, and the cost of borrowing, at least at Zopa, has dropped a little).

I have small investments with Zopa (personal loans) and Funding Circle (business loans) and have earned a return of 6-7% at Zopa and 8.5% (gross) at FC over the past year and a half. I can't easily quantify my overall risk exposure for either, but it's low enough not to worry me and should be pretty similar for both.

In my opinion p2p lending currently offers better returns than savings accounts with acceptable risk.

ErikP

There is a phenomenon on Zopa which is becoming more and more noticeable. Most borrowers use their weekend spare time to do the business of registering online for a loan whereas a fair amount of fresh money on the Zopa system is loan repayments on schedule coming in during the working week being automatically offered on the market.

In other words, fresh cash arrives during the working week and is drawn down at the weekends.

There is also a monthly cycle. More repayments come in in the first week of the month since borrowers paid monthly like the Direct Debit to leave soon after payday. So the best chance for a lowish interest rate would be an application made on (my guess) the first Wednesday of the month.

jamesd

drjones wrote: »

Zopa currently gives better returns than any savings account, although the reward/risk ratio has diminished somewhat over the past year or so (as savings interests have risen slightly, and the cost of borrowing, at least at Zopa, has dropped a little).

You can get 8% with no risk from First Direct for up to £300 a month using their regular saver account. You can get over 7% from the Invesco Perpetual Monthly Income Plus fund, tax free in an ISA.

Savings aren't the real competition for Zopa. Zopa is putting your capital at risk, savings aren't. Zopa's competition is other investments and at 6-7% return taxable Zopa is beaten by them, particularly for higher rate tax payers.

The big risk of P2P lending isn't the borrowers. It's the man in the middle getting lending standards wrong. Zopa did that back in 2008 and bad debt ended up being about twice the estimates at the time the loans were made. But I assume that was unintentional; there's also risk of doing it deliberately. That's happened even at some mainstream lenders.

Those things aren't a reason never to use Zopa, provided you have a high risk tolerance, but it is good to know that you can get higher returns elsewhere most of the time.

ErikP wrote: »

fresh cash arrives during the working week and is drawn down at the weekends. ... There is also a monthly cycle. More repayments come in in the first week of the month since borrowers paid monthly like the Direct Debit to leave soon after payday. So the best chance for a lowish interest rate would be an application made on (my guess) the first Wednesday of the month.

Both of those have been part of the system since the early days. The last year or two have been a bit unusual because there was usually so much money available and chasing rates down that the effects made no difference. That also meant that there was a very narrow range of rates that could be matched. There used to be a lot more variation and that is back at times now.

I've recently created a few offers that may get used if the rates ever reach levels that I consider sensible. The top of the Zopa has at times been higher than my lowest lending offer but no borrowing has resulted. These are still pretty marginal offers so far as likely profitability goes compared to alternatives, though. Just a little diversification for me.

The first Wednesday isn't a good rule for best time. Best would be around second or third of the month after 10PM, delaying until the Tuesday if those are a weekend. Though there may be better days a little later.

Have a look at Zopa MI if you want to see some more idea of if and maybe when it's a better time to lend than usual. Enough patience to lend at the most potentially profitable times is helpful at Zopa, as with other investments.

polo-mk3

I tried them today for a £3000 for a car and was declined.

The funny thing about it was the web site did not even think about it.

just click and declined. :mad:

Must me powerd by "homer simpson's drinking bird".

Unlike when you go to your bank for example, after you fill all that crap out and submit, the site may sit there for a about 10 to 30sec to 1min and give you a yes or no.

I think there site is more of a online puzzle, tick and answer the right boxs before you get the real check.

jamesd

There are two filtering stages there. First there's the pure automatic check that you didn't pass. Then it goes to human underwriting. Depending on the market maybe 80% of people who make it past the first stage will be declined at the second. They don't make an entry on your credit record that's normally visible to other lenders in those cases, so no harm done except to your morale.

Spoff

What do people in the know think about Zopla?

I've not paid enough attention to my money recently and need to get a loan to cover some costs I should never have allowed build up. There is no risk of me missing any monthly payments, just wondering how reliable these guys are.

Has anyone borrowed money from them?

27col

Spoff wrote: »

What do people in the know think about Zopla?

I've not paid enough attention to my money recently and need to get a loan to cover some costs I should never have allowed build up. There is no risk of me missing any monthly payments, just wondering how reliable these guys are.

Has anyone borrowed money from them?

What do you mean, you're "wondering how reliable these guys are?" Reliable, in what way.
It is us, the lenders who are taking the risk. Lending to complete strangers. ZOPA doesn't lend money, all it does is to put lenders like me, in touch with borrowers like you, and we lend the money.
Zopa just does the paperwork, credit checks and money handling, for which we pay them a fee. If they didn't do a good job, most of us lenders would withdraw our money, and the whole thing would fold. Anything more that you need to know?

TheLorax

I was surprised to read the negative post you have placed regarding zopa. I have had great success on there which I could not have got from a savings account. Martin says that the best rate for savers with an instant access saver is at a rate of 5.6%. This sounds decent, although after searching MSE and the best saving accounts suggested on his site the best instant access saver I could find is 2.4%. (Strange, have you not researched or updated your site. If you could post the link to this I'd like to know) I have averaged on zopa the lowest market rate being 7.45% after fees = 6.45% the highest paying market being 11.68% =10.68% after fees. (The market rates vary over time and over different markets) true there is risk but I have had £20 bad debt which was recovered and two late payments which were later paid. True the market is quite,low at the minute but still you can lend out at 7.2% and expect to match this. This would give a return of 5 to 6% after fees and bad debt. As a lender you also have the option for rapid return which effectively gives you instant access. When your money isn't matched it sits in a current account accruing a nominal interest typical of many modern current accounts. My feeling is that MSE probably get a lot of revenue from recommending banks and credit cards and very little or nothing from zopa. Don't be surprised if this post gets deleted.

TheLorax

Furthermore zopa,use experian the same credit rating agency the major banks use